PlayStation 4 vs. Xbox One: Who Will Be the Sales Leader?

In the last of my three-part series on the current and future health of the console gaming industry, I'm going to focus on what is sure to be a clash of video game titans. In just two months from now, the PlayStation 4 and Xbox One will launch and the eighth generation will finally be in full swing. The two systems are being preordered in record numbers, and anticipation for the new generation is high. But the question on everybody's mind is "Who will come out on top?" They're both very capable systems with large fan bases and both will certainly sell very well, but only one can be the sales leader. Not that coming in first means much for anything besides bragging rights, but speculating on who the "winner" makes for an interesting mental exercise. So, I'd like to take the time to objectively assess the fortunes of these two systems,

So, let's go back several months to the announcements of the two systems. The PS4 was announced first at an event this past February. They showed off some games that would be coming to the system, introduced the Dual Shock 4, and announced various features, though the system itself was a no-show, there was no system specs, release date or price announced just yet. Overall, it seemed fairly well-received despite the lack of details regarding the hardware.

Three months later, the Xbox One was announced. Reception was... less than stellar by comparison. We all know the basic story by now: The announce event was noted for its relative lack of focus on games (something that made it the subject of parody), but more important was the fact that from the announce on up the week of E3, the XBO was mired in PR disasters that MS brought upon it through the announcement of various unpopular policies as well as some boneheaded statements made by people like Don Mattrick. While MS did show off several exclusive titles at E3, including the well-received Titanfall, the system itself was embroiled in controversy.

Meanwhile, at Sony's E3 press conference, it was announced that the PS4 would cost $400, a full hundred less than the XBO, that it would not require any sort of internet connection to work, and that it would be placing no restrictions on lending, borrowing, trading, selling, or buying second-hand games. It was at that moment that many considered Sony's victory to be guaranteed. Just to rub salt into the wound, in what was perhaps one of the sickest burns in gaming history Sony released a humorous video detailing how to trade games on the PS4. Sony has been spot-on with their messaging these past few months, and everything has been going their way, a marked change from 2006 where Sony's E3 event was the source of ridicule back then (remember Giant Enemy Crabs and "$599 U.S. Dollars"?). Needless to say, things weren't going good for Microsoft, and the war hadn't even officially started.

In the weeks following E3, after mountains of criticism as well as indications that the PS4 was garnering far more preorders than the XBO, Microsoft sought to undo the damage. They've rescinded all their most hated policies. There will no longer be any restrictions on second-hand games, the system no longer has to regularly connect to the internet, the Kinect is no longer required to be connected to the system in order for the system to function, and indie devs can now self-publish. Suddenly, after weeks of playing catch-up the XBO was looking far more appealing. The two are on far more even footing right now, and the XBO is now looking like it will perform much better than what one would have assumed back at E3.

However, initial reception is a short-term problem, and while it may affect sales in the first quarter or two after these systems launch, this will be a battle that won’t be fought by the earliest adopters. It’ll be played out for the rest of this decade and on into the early years of the next, and the results will be determined by the general gaming public. While the hardest of the hardcore will be lining up for the midnight launches in November or will otherwise be getting them this holiday season, they represent a small portion of the gaming public. Whatever controversy there was before, it will quickly be a non-issue after launch, especially considering the main sources of controversy just aren't there any more. But there are plenty of other more relevant factors that will determine each system’s success amongst the general public in the longer term. So, what are these factors, and how do the PS4 and XBO stack up to each other?

1) Price. At $400 the PS4 is more competitively priced than the XBO, which is priced at $500. It's obvious that the primary reason the XBO costs $100 more than the PS4 is the Kinect. While the Kinect is no longer required to be connected to the XBO for it to work, Microsoft is still adamant on insisting that the device be bundled with the XBO, now and forever, no exceptions. As a consequence, there will only be the singular $500 SKU.

It is incumbent on Microsoft to convince those who haven't yet decided between PlayStation and Xbox that the higher price tag is worth it. The only distinguishing features remaining for the XBO when compared to the standard PS4 SKU are the Kinect, the ability to connect to a cable box to watch live TV (but not shows on a DVR or on On Demand) directly on the Xbox instead of having to switch AV inputs, and a handful of exclusive apps (e.g., the ESPN and HBO Go apps), and the ability to seamlessly switch between games, media, and apps. These features, when combined with its Blu-ray player and all the streaming video apps like Netflix that are now standard for game systems, are a central feature of MS's messaging for the XBO. After all, it's called the Xbox One because it's being marketed as not just a game console but also an all-in-one set-top box (though the PS4 can play Blu-ray discs and has streaming video apps like Netflix and Hulu as well). If MS can persuade enough people that those features are worth it, then the higher price may not be a significant disadvantage.

However, this may prove difficult. Since you still need a cable box to use the TV viewing functionality, not to mention said feature is apparently limited to watching live TV, it begs the question "What’s the point?" Is being able to watch live TV directly on your Xbox that big of a convenience? Are the Kinect's voice & gesture commands really that much better than a simple remote control? Also, what of households that already have a smart TV, smart Blu-ray player, or a set-top boxes like the Roku? Will the XBO's non-gaming features really be that impressive as to be a deciding factor with these people? Finally, most of the XBO's features require an XBL Gold subscription, which could prove to be a deterrent for many (more on this in a bit). And let's not forget about the tens of millions of households that don't have broadband internet at all.

If MS fails to justify that $500 price tag to the general gaming public, it will be a handicap that will hobble sales until the system reaches price parity with the PS4. Unless someone is a diehard Xbox fan and/or really wants MS's exclusives, then they'll take a look at two very similar systems that both play COD, Battlefield, Watch Dogs, Destiny, etc., see that one is charging $100 more just for a motion camera/controller, and odds are they'll more likely end up going with the less expensive option. I'd also like to point out that Sony is apparently going to offer a $500 PS4 bundle that contains two controllers, the PS Eye camera accessory, and a copy of Killzone: Shadow Fall. What will customers find to be the better deal between the two systems? We'll see.

2) Pay Walls. The only thing Sony is locking behind the PS+ pay wall is online gaming and the Instant Game Collection. Meanwhile, about the only things MS is not locking behind the Gold pay wall is single-player games & LAN play, access to the XBL Marketplace, and the ability to watch Blu-rays/DVDs and listen to music. For those uninterested in online gaming (most console owners don't play online; only a third of 360 owners have XBL Gold), having to pay an annual fee to access services like Netflix, Hulu, Facebook, the game DVR, live TV viewing, and so forth will be a turnoff for many potential XBO buyers. Microsoft should probably consider scaling back the number of features that require XBL Gold. It couldn't hurt, and it'd probably help.

3) Online Requirements. The PS4 absolutely does not require an internet connection at any point, ever. Meanwhile, even though MS reversed their previous policy that mandated a regular internet connection (which would have doomed the system to a distant second behind the PS4, if not consigned it to dead last, as fully a third of all households lack broadband internet) and now the XBO no longer needs to connect regularly, it still must connect when you first get it to download the "Day One" update. This could prove burdensome to many who do not have ready access to the internet, potentially making it to where some of them will effectively be shut out. It's still possible that programs will be offered to where certain retailers will allow the consumer to bring in their XBO to download the update there, but so far there's been no such program announced. It's also possible that the need for the "Day One" update only applies to the initial production run, and future production runs will come with the update pre-installed, but again there's no guarantee that this will be the case. It's uncertain how much the need for this "Day One" update will affect the XBO's sales, but it could be significant in areas with poor or no internet infrastructure.

4) Exclusives. While both the Xbox and PlayStation brands rely largely on multiplatform titles, the importance of exclusives can never be underestimated or overstated, as some of the more popular exclusives can sell many millions of copies. In this area, the PS4 and XBO are a wash in the short term, with both systems having three major exclusives coming out at launch and a fourth coming out early next year. However, Sony has a clear advantage in the long-term. They have a veritable army of first- and second-party studios at their disposal, including but not limited to: Naughty Dog, Sucker Punch, Guerrilla Games, SCE Japan (which includes Team ICO), Media Molecule, SCE Santa Monica, Polyphony Digital, Quantic Dream, and Ready at Dawn Studios. Meanwhile, MS is lacking in this regard. Currently, the only first-party studios they have that work on AAA titles are 343 Industries (Halo), Turn 10 Studios (Forza), Lionhead Studios (Fable), and Black Tusk Studios (currently unknown IP).

The only major first-party title coming to the XBO during its launch window is Forza 5, and it's looking like there won't be any others until Halo 5 comes out, which is not until next year (most likely in the fall). Most of the Xbox brand's exclusives are third-party, meaning that MS had to buy exclusivity rights. Their most notable third-party exclusive on the 360 is the Gears of War series, while third-party exclusives for the XBO include Titanfall, Dead Rising 3, Sunset Overdrive, and Quantum Break. However, as Microsoft technically does not own any of these franchises, there is a possibility, however remote, that they could all one day come to PS4.

Unfortunately, Microsoft's failure to expand their first-party efforts may hurt them in the long run. In order to pad out their selection of exclusives, MS basically has to engage in "moneyhatting" to secure exclusivity rights from third-party publishers, which won’t be feasible after the first year or two when the systems have a large enough install base (Sony does buy exclusivity rights from third-party studios as well, but they're not as reliant on this practice as MS is). They’d have to offer larger and larger sums of cash to publishers to cover the sales lost from not releasing on the PS4. Unless they focus on expanding their in-house efforts, the XBO will quickly start to look like the 360, which by 2009 had been reduced to Halo, Gears of War, Forza, and Fable as its only major exclusive franchises (and as mentioned Gears is technically not even owned by MS), with a couple of one-off titles like Alan Wake (also a third-party title; its developer, Remedy, appears to make games solely for Microsoft now despite being an independent studio).

5) Brand Strength. Now, this is where the historical analysis comes in. Looking at what happened with their predecessors can help us understand how things will likely play out between the PS4 and XBO. So, let's start with the fifth generation, which saw Sony's sophomore effort and the debut of the Xbox brand. While the PS2 dominated the sixth generation, with the Xbox a distant second place, the PS3 and 360 were far more competitive and in terms of global sales to date the two are sitting neck and neck. Sony went from having over 70% of the market share and MS a mere 11%, to both of them having about 30% (note: I’m defining market share in this case being the proportion of one console’s hardware sales to the total amount of hardware sales; handheld consoles were not included). But how did this happen?

I think the primary reasons for the 360′s success were its price, its superior online service, its one-year head start over the competition, and America's notoriously fickleness. By the end of 2006, the 360 had sold about 10 million units globally and 4.5 million units in the U.S., while the PS3, having only been out for a few weeks, had sold only 1,400,000 units globally and 690,000 units in the U.S. (though the PS3 wasn't out yet in Europe). By the end of 2007, the first full year all seventh-gen systems were on the market, the 360 has a global install base of 17.7 million, with the PS3 sitting at 10.4 million. This difference was even more pronounced in America. According to NPD data, by the end of 2007, the 360 had an install base in the U.S. of over 9 million units, while the PS3 was sitting at just over a third of that with only 3,250,000 units sold, which is a huge deficit. Here's a couple of charts comparing the overall performance of the 360 and PS3 in the U.S., first by annual sales figures then by launch-aligned cumulative LTD sales (note: In the second chart, Year 1 is a partial year, as the systems launched in November; Year 2 is their first full years, which is 2006 for the 360 and 2007 for the PS3):

In addition to giving it a strong numerical advantage, the 360's head start allowed it to accumulate a solid selection of major software titles. By time the PS3 had launched in November of 2006, titles like Call of Duty 2, Gears of War, Elder Scrolls IV: Oblivion, Saint's Row, Dead Rising, and Rainbow Six: Vegas had released for the 360 (some of these would later be ported to the PS3). By the end of 2007, which is often considered a defining year in gaming history, several major exclusives were released for the 360, including Crackdown, Forza 2, and the highly-anticipated Halo 3, which appealed very strongly to Western and especially American gamers and went on to become the best-selling non-Nintendo game of the year. Microsoft had also picked up BioShock and Mass Effect as timed exclusives. Meanwhile, the PS3 had yet to accumulate a sizable library of exclusives; Resistance and Motorstorm were still the best-selling PS3 exclusives by far at the time, though by the year's end Uncharted and Gran Turismo 5 Prologue would debut. In addition, popular third-party multiplatform titles debuting in 2007 like Assassin's Creed and Call of Duty 4 sold most of their copies on the 360 due to the system's larger install base. As mentioned, American gamers are quite fickle, and have no collective brand allegiance, and with the 360 being a better value proposition in the early years of the generation, they naturally shifted from PlayStation to Xbox (and Nintendo as well, but that's neither here nor there). It continued building on that momentum from then on out.

So, the 360 already had a sizable amount of the American audience locked in by the end of 2007 thanks mostly to its one-year head start coupled with the strengths of XBL, a more competitive price point, and a better selection of games early in the generation, and it would spread from there, going on to retain a substantial lead in America, which it still has today. It has also experienced better sales growth over the course of its life (note the slightly widening gap in the second chart above).

But despite the 360's dominance in America and its one-year head start, it couldn’t overcome the fact that PlayStation is a much stronger global brand. Even with the advantages it had, the 360 sold fewer units in its first 25 months in Europe than the PS3 did in its first 12 months. The Xbox brand also remained irrelevant in Japan. Later in the seventh generation the PS3 shed the disadvantages it had early in its life. It eventually gained its own impressive selection of exclusives, reached price parity with the 360, and improved its online service, further cementing its status outside of America. Despite coming out a year after the 360 and despite the 360 outselling it in America by a wide margin, the PS3 has caught up with the 360 in global sales, with both systems selling about 78 million units worldwide. The PS3 has simply sold at a faster rate on average than the 360. The 360 has been out 82 months while the PS3 has been out 70 months. Assuming there are exactly 78 million of each system, that translates to average sales per month of over 951,000 for the 360 and over 1,114,000 for the PS3. That’s an average of over 17% more PS3s sold per month. Recall these two charts from my previous article, which concerned the Wii U (note that the years in the second chart are the Japanese fiscal year, which run from April 1 to March 31, so Year 1 for the 360 in this chart ends March 31, 2006 while Year 1 for the PS3 ends March 31, 2007):

As is plainly obvious, except for its first few quarters on the market, the PS3 has consistently done better than the 360 did any any given point after its launch. The numbers show quite clearly that global audiences prefer Sony's offerings to those of Microsoft. Based on available NPD data, while about a third of all PS3s sold so far have been sold in America, over half of all 360s have been sold in the U.S. This means the 360 has to date sold about 50% more units in America than the PS3 has, while in all regions outside of America combined the PS3 is the one that has sold 50% more units than the 360. In Europe, the PS3 has consistently outsold the 360. In Japan, the 360 has barely even registered, with only about 1,600,000 units sold to date; the PS3 has outsold it there by a roughly 6:1 margin, with over 9 million units sold to date. The importance of American sales for the Xbox brand cannot be understated. Even the original Xbox was heavily dependent on U.S. sales; of the 24 million units it sold, two-thirds of those were sold in the U.S.

Had both the 360 and PS3 cost the same, launched at the same time, and had roughly equivalent online services, it's possible and perhaps likely that the 360 may have ended up with sales far lower than what it has today. It does have a much better selection of exclusives than the original Xbox did, so it most likely would have sold a lot better than the original Xbox. It may have taken a comfortable second place in America, but globally I think it would not have performed nearly as well. But the conditions of the early seventh generation were what they were, and they allowed for Microsoft to greatly expand their market share, though the strength of the PlayStation brand still allowed for the PS3 to sell at a fast enough rate to where it has caught up with the 360 (and by time both systems go out of production, the PS3 may have a lead of a few million units).

Of course, the conditions that existed back in the early years of the seventh generation do not exist for the eighth generation. The PS4 and XBO are launching only a week apart, so neither system has a massive head start. While PSN wasn't much to talk about in the earlier years of the PS3's life cycle, it has improved over time, and now the premium PS+ service is just as robust of a service as XBL Gold (some might say more so thanks to its Instant Game Collection). The PS4 is the one selling at the more competitive price point this time around (doubly significant since the seventh generation started before the ’08-’09 recession, whereas in 2013 many are still feeling the residual effects of the recession). The PS4 is also the system of choice for indie developers. Also, MS mired the XBO in PR disasters of their own making. The negative publicity surrounding it from its announcement on up to when their unpopular policies were reversed has damaged the system’s reputation and may negatively impact its sales. While those policy reversals may have won back many people and the fallout from this past summer will quickly fade into memory, they may have permanently lost some customers.

The PS4 has the advantage going into the eight generation, and it’s Sony’s ball game to lose. Without a head start, the XBO won’t be able to lock in millions of gamers like the 360 did. Furthermore, it’s price is a potential disadvantage amongst the general public, even if it isn’t amongst hardcore brand loyalists. In terms of American sales, the XBO and PS4 will likely sell about the same, though the PS4 might sell somewhat better initially due to its price advantage, but in Europe I suspect the PS4 will outsell the XBO by a 2:1 margin and in Japan Xbox will remain largely irrelevant. In terms of global sales that translates to a resounding victory for the PS4. I suspect the PS4 will outsell the XBO by at least a 4:3 margin worldwide. By the end of 2020, I think the PS4 will have sold around 110 million and the XBO about 85 million (that’s assuming the consumer base doesn't grow any).

Even in the short term, the PS4 is already looking to be the sales leader. All the clues point towards it having significantly more preorders than the XBO. Also, I've been tracking software title rankings on Amazon's best-selling games list, and while the PS4 and XBO ports of COD Ghosts (which will likely be the biggest title coming to next-gen, as COD has always been a huge seller since 2007) seem to be at a dead heat, the PS4 port of Battlefield 4 seems to have a slight lead, while the PS4 versions of Assassin's Creed IV and Watch Dogs are far ahead of the XBO versions. Even multiplatform games that are further out are showing the PS4 version well ahead of the XBO version, sometimes by an obscene amount. As for exclusives coming out at launch, the XBO fares a bit better. While Killzone: Shadow Fall looks like it will be by far the best-selling system exclusive, the XBO titles Forza 5, Ryse, and Dead Rising 3 are trending well ahead of the PS4's other exclusives Knack and DriveClub. While VG Chartz probably isn't the best place to reference preorder figures, their preorder numbers chart is consistent with what I've seen at Amazon, at least in regards to relative performance. Of course, that's just U.S. numbers. While Amazon Canada is showing next-gen titles trending about the same as on Amazon.com, Amazon UK, Amazon France, and Amazon Germany are showing a blowout for the PS4. Whether any of these numbers will actually translate to a clear win for Sony when the systems and games actually go on sale remains to be seen, and the actual results may be much closer, but things do appear to be favoring the PS4. (Note: I have recorded sales positions for several different days at Amazon.com, and on one day each for Amazon Canada, UK, Germany, and France, all between 7 and 9 PM EST. This data will be made available on request.)

But even if the PS4 is the sales leader by a landslide, the XBO will most certainly not be a failure, and I think it'll sell at least as well as the 360 over the course of its life if not more so (it might lose overall market share, but absolute sales numbers may remain constant or even grow due to audience size growth). Whatever mistakes they've made in the weeks following the XBO's announcement, and whatever advantages Sony has over them, Microsoft Studios has built a strong brand that filled the gap left when Sega stopped being a hardware maker, and having both the Xbox and PlayStation brands breeds strong competition, which is good for gaming as a whole. I'm picking up a PS4 on launch day (getting one first because it's less expensive and its exclusives interest me more), and I will likely be buying an XBO by time Halo 5 launches. Both systems look like solid investments that will be enjoyed by anyone who buys them. The future is looking bright for the nascent eighth generation of console gaming, and I'm looking forward to seeing what the next few years of gaming will be like.